Yes, that's correct. Sorry for getting that wrong in my initial description of the bug. That's the same as the indentation behavior with auto-fill-mode disabled. A hanging indent is not assumed with only one line.

On Tue, Aug 22, 2017 at 8:49 AM, <npostavs@users.sourceforge.net> wrote:
Samuel Freilich <sfreilich@google.com> writes:

> $ emacs -Q -l markdown-mode.el
> M-x markdown-mode RET
> M-x auto-fill-mode RET
> M-x set-fill-column RET 5 RET
>
> Type the following into the buffer and hit RET:
> * Item
>
> Actual result:
> *
>   Item
>   [cursor]
>
> Expected result:
> * Item
>   [cursor]

With the patch I get

* Item
[cursor]

i.e, the cursor lands in column 0.  Is it correct?